Hatch, GOP Warn IRS Against Abusing Tea Party

Senate Republicans expressed concern on Wednesday that the Internal Revenue Service was singling out tea party groups for extra scrutiny in deciding whether to grant them tax-exempt status.

Leading the effort are Orrin Hatch of Utah, the ranking Republican on the Senate Finance Committee, and Rob Portman of Ohio. Some tea party groups oppose Hatch’s re-election.

“It is critical that the public have confidence that federal tax compliance efforts are pursued in a fair, even-handed, and transparent manner — without regard to politics of any kind,” the senators wrote to IRS Commissioner Douglas Shulman.

Their letter followed a similar one written March 1 by House Ways and Means Oversight Subcommittee Chairman Charles Boustany of Louisiana and followed a call by Senate Democrats for the IRS to cap political spending by nonprofits that don’t disclose their donors.

Anti-tax tea party groups have backed Republicans, and gaining nonprofit status would allow them to engage in political activity while keeping their donors hidden, unlike traditional political action committees. They are applying for social welfare status under Section 501(c)(4) of the tax code, which means that political activity can’t be their primary focus.

Other nonprofit groups such as Crossroads GPS, affiliated with Republican strategist Karl Rove; and Americans for Prosperity, funded in part by Koch Industries Inc. executives Charles and David Koch, spent more than $130 million on the 2010 elections, with more than $120 million of that to elect Republican congressional candidates. The money helped the Republicans gain 63 House seats and 6 Senate seats.

On the Democratic side, a PAC supporting President Barack Obama’s re-election, Priorities USA Action, has an affiliated nonprofit that can keep its contributors hidden.

Outside group spending has increased since the Supreme Court, in its 2010 Citizens United decision, removed restrictions on independent corporate and union spending on political ads.

The Chattanooga Tea Party of Tennessee, Waco Tea Party of Texas, the Kentucky 9/12 Project, and other tea party groups have reported that the IRS is seeking additional information in response to their applications for nonprofit status.

“Civic and social welfare organizations have long performed valuable roles and offered numerous benefits to our society,” the senators wrote. “It is imperative that organizations applying for tax-exempt status are able to rely on a consistent and foreseeable review structure from the IRS. Any significant changes to the IRS review process should be implemented only after appropriate notice and opportunity for comment from the public and affected parties.”

A spokesman for the IRS, Anthony Burke, had no immediate comment on the letter.

Senators besides Hatch and Portman who signed the letter include Republican leader Mitch McConnell of Kentucky; Charles Grassley of Iowa; Lamar Alexander and Bob Corker of Tennessee; Pat Roberts of Kansas; John Cornyn of Texas, chairman of the National Republican Congressional Committee; Kay Bailey Hutchison of Texas; Jon Kyl of Arizona; John Thune of South Dakota; and Rand Paul of Kentucky.

Senate Democrats asked Shulman on Monday to impose limits on political spending by nonprofits and said they would introduce legislation to do so if the agency failed to act. They announced on Wednesdasy that a working group would draft legislation to force groups airing political ads to reveal their donors. Senate Republicans in 2010 blocked similar legislation.

“Making sure that every American knows who is funding the election ads they see and hear is even more important now that the Supreme Court has allowed companies to contribute unlimited amounts of corporate cash to influence elections,” said Sen. Al Franken of Minnesota.

A coalition of labor unions, consumer groups and organizations favoring stronger campaign finance laws said this week that they would start targeting companies that contribute to nonprofit groups spending money on campaigns.

“‘We the people’ will not stand idly by while the country’s major corporations use their massive wealth to buy our democracy,” said Common Cause President Bob Edgar, a former Democratic U.S. representative from Pennsylvania. “We will do all we can to expose the corporate spending that threatens to drown out voters’ voices.”

Another group, Citizens for Responsibility and Ethics in Washington, asked the IRS today to investigate Americans for Tax Reform, which made $4.1 million in independent expenditures for the 2010 elections, according to the Center for Responsive Politics, yet reported to the IRS that it spent $1.9 million on political and lobbying activities in 2010.

The group is headed by Grover Norquist, an anti-tax advocate. John Kartch, a spokesman for ATR, didn’t immediately respond to requests for comment.

IRS spokesman Burke said federal law prohibits the agency from commenting on whether it is investigating a particular organization.